Action Alert: Final DOL Rule on Timeliness of Participant Contributions

Issued by the AICPA Employee Benefit Plan Audit Quality Center January 15th, 2010

On January 14, 2010 the Department of Labor (DOL) issued final regulations on the Definition of Plan Assets – Participant Contributions which establishes a safe harbor period for certain employers to deposit participant contributions on a timely basis.

Under this final regulation, participant contributions to a pension or welfare benefit plan with fewer than 100 participants at the beginning of the plan year will be treated as having been made to the plan in accordance with the general rule (i.e., on the earliest date on which such contributions can reasonably be segregated from the employer’s general assets) when contributions are deposited with the plan no later than the 7th business day following the day on which such amount is received by the employer (in the case of amounts that a participant or beneficiary pays to an employer) or the 7th business day following the day on which such amount would otherwise have been payable to the participant in cash (in the case of amounts withheld by an employer from a participant’s wages).

The DOL solicited comments on whether the regulation should be extended to large plans. After careful consideration of the comments, the DOL did not believe that it had a sufficient record on which to evaluate current practices and assess the costs, benefits, and risks to participants associated with extending the safe harbor or any variation thereof to large plans at this time. As a result, the DOL has determined not to extend the safe harbor provision to cover participant contributions to a pension or welfare benefit plan with 100 or more participants.

Click here to read the final DOL rule in its entirety.

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AICPA Issues Technical Practice Aids on Estimating the Fair Value of Investments that Calculate Net Asset Value

The AICPA issued Technical Information Service (TIS) Section 2220, Long-Term Investments, to assist reporting entities when implementing the provisions of Financial Accounting Standards Board (FASB) Accounting Standards CodificationTM (ASC) 820, Fair Value Measurements and Disclosures, to estimate the fair value of their investments in certain entities that calculate net asset value. Sections 2220.18-.27 apply to investments that are required to be measured and reported at fair value and are within the scope of paragraphs 4 and 5 of FASB ASC 820-10-15.

The guidance discusses:

  • Applicability of practical expedient, i.e., which investments are permitted to be measured at fair value on the basis of the net asset value (NAV),
  • Determining whether the NAV calculated is consistent with FASB ASC 946, Financial Services – Investment Companies
  • Determining whether an adjustment to NAV is necessary
  • Adjusting NAV when it is not as of the reporting entity’s measurement date
  • Adjusting NAV when it is not calculated consistent with FASB ASC 946
  • Disclosures – ability to redeem versus actual redemption request
  • Impact of “near term” on classification within fair value hierarchy
  • Categorization of investments for disclosure purposes
  • Determining fair value of investments when the practical expedient is not used or is not available

Click here to read the TPAs in their entirety.
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